The practice of offering the holding insurer final refusal on group risk renewals is commonplace throughout the sector. But, John Ritchie asks, is it harming you and your clients' business?
The practice of asking to match is really a habit retained from the days when there were risks for clients (and therefore, for their advisers) in transferring schemes from one insurer to another.
These risks have been mitigated to the extent that there are very few schemes that cannot risk being switched.
That being so, the practice now makes little sense, so long as there is no damage done to the things that are healthy about group risk business.
There is obviously nothing wrong in testing the market to find the best rate it’s part and parcel of an independent adviser’s job.
But it is surely more efficient to make it plain to every office quoting for a piece of business, including the holding one, that they should quote their best rate at outset.
It is this simple but fundamental behaviour shift that has had a major impact on some advisory businesses.
All insurers can then focus on producing quotes that reflect their own underwriting bases, knowing that if their quote is best, they win (or hold on to) the business.
The protracted quoting and counter-quoting, which often descends into a Dutch auction, is avoided.
Premiums are still keen, though, because insurers know that if they want to win business, they have to put out figures that will stand a chance against their rivals.
This is why many advisers, including several of the major employee benefit consultants, are increasingly telling incumbent insurers they are required to produce their definitive quotation to the same deadline as all the other insurers quoting.
As a result of doing so, these advisers bring more control to their own processes and are not constrained by service deficiencies on the part of any provider.
The whole review process is faster and costs less to manage.
They can tell their clients the deadlines they are working to with the confidence that they will be met.
The information we are getting back from advisers going down this route is that the premium rates they are obtaining are at least as good for the client as they were in the days when they went back to the holding insurer.
Taking Action Now
Ultimately, it is the impact on clients that matters. It can hardly engender respect for an insurer’s expertise or integrity if one premium rate is quoted initially, only for the same insurer to turn around later and match a much better rate.
Surely a client is reasonably going to wonder why the insurer didn’t quote the much better rate in the first place. (And probably conclude that it was to see if they could get away with charging a higher premium than they needed to.)
If insurers are required and allowed to quote only once, clients continue to obtain their cover at premiums still heavily influenced by market competition, but without suffering the uncertainty created when deadlines for receiving reports from their advisers are postponed.
Or because reports have gaps pending their advisers receiving full information from insurers.
As more advisers start to insist on having each insurer’s definitive rate from the off, the resulting improvement in service standards and clarity of communication will only enhance the group risk sector’s reputation.
John Ritchie is CEO of Ellipse
